Home/Economy/ Trump promises to 'make it up' to farmers hit by China tariffs

Trump promises to 'make it up' to farmers hit by China tariffs

Pete Saunders |Tuesday, April 10, 2018

No one will win in a US-China trade war

PresidentDonald Trump recently announced that he meant to impose tariffs on about $50 billion in Chinese imports, citing the United States' massive trade deficit with the country.

Xi also saidChina would raise the foreign ownership limit in the automobile sector as soon as possible and push previously announced measures to open the financial sector.

China and Hong Kong stocks firmed on Tuesday, as Chinese President Xi Jinping's vow to further open up the economy in a speech at the Boao forum eased worries over rising trade tensions between the world's largest economies. The sharpness of the decline was mostly the result of record-high Chinese investment in the U.S.in 2016 and Beijing's crackdown on capital flight.

Trump yesterday predicted China would take down its trade barriers "because it's the right thing to do", saying he and President Xi "will always be friends".

Josh Crabb, head of Asian equities at Old Mutual Global Investors, has also increased allocation to Chinese equities on the view they are still cheap and that the trade dispute will be resolved. His remarks seemed created to offer some policy initiatives, if not concessions, while drawing a contrast with President Trump's "America First" agenda and portraying China as a steady global partner committed to the worldwide trade order.

Fund managers argue that the steel and aluminum on which the U.S. has announced tariffs are a tiny proportion of China's exports.

For the moment, the U.S. administration has focused on rallying allies against China instead of opening up a multi-front trade war that the United States risks losing. "But it's something we had to do", the president said last Friday. This announcement came a day after Beijing announced plans to impose $50 billion of tariffs on American products. "I wouldn't say that's nice, but I tell you our farmers are great patriots", Trump said. Zhang Yuyan, a researcher at the Chinese Academy of Social Sciences, a government think-tank, said China was unlikely to sell off its holdings of U.S. Treasury bonds as a tactic in the trade dispute.

The latest annual survey from the American Chamber of Commerce in China found that its members "continue to feel foreign business are less welcome in China than they once were".

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President Trump acknowledged Monday that American farmers may be hurt by Chinese tariffs. The U.S. initially announced $3 billion worth of tariffs on Chinese imports, to which the Chinese appropriately responded with $3 billion of tariffs on U.S. made goods. Canada, Mexico and Japan were the top exporters of cars to the U.S. China is the world's largest buyer of soybeans, and it can not meet its demand without buying US beans.

With the world's two largest economies skirmishing with punitive economic measures and counter-measures, recent developments could lead to a trade war that would be brutal in terms of its ramifications on both countries and on the rest of the world as well.

"We're cautiously bullish here", said Dan Hussey, a market strategist at RJO Futures in Chicago. But even as Trump cozied up to Xi and pressed China for help with derailing North Korea's nuclear ambitions, he has ratcheted up the economic pressure and threatened tariffs, a move opposed by many fellow Republicans.

Not only does having many others on its side make it easier for China to resist the United States, but also it undercuts the effectiveness of our sanctions.

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"This is what a trade war looks like, and what we have warned against from the start", said National Retail Federation President and CEO Matthew Shay.

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